Corporate Finance

The funds industry at the crossroads of technology & geopolitics

On February 9th, finance & funds professionals gathered at the ECCL to attend a new edition of FundsEvent. This year's main thematic was "Investment Trends: Picking the Relevant Strategy", and international and local experts shared their expertise with the audience on macroeconomic and political challenges but also on the opportunities offered by technology in the funds industry.

© Farvest Group

On February 9th, finance & funds professionals gathered at the ECCL to attend a new edition of FundsEvent. This year's main thematic was "Investment Trends: Picking the Relevant Strategy", and international and local experts shared their expertise with the audience on macroeconomic and political challenges but also on the opportunities offered by technology in the funds industry.


The conference was moderated by Gunnar Knierim, Director, AB, who highlighted the fact that we are currently facing challenging and uncertain times, notably with the Trump administration, Brexit and upcoming elections in Europe. "Nowadays, portfolio management is much more complex than it was 50 years ago. We need to answer the needs of clients to serve them with better advice to fulfill their investments" added Gunner Knierim.

 

Olivier Portenseigne, Managing Director, Fundsquare, then took the stage, stating that "technology and especially blockchain could create a whole new distribution and operating model". As more and more regulations are being introduced, such as MIFIDII and PRIIPS, the way funds are distributed is changing. "Asset managers and banks have a common behavior and need to put greater emphasis on simplicity, to sustain investors trust in the future". The FundsDLT solution, developed by Fundsquare, InTech and KPMG Luxembourg notably allows to track ownership of financial assets in real time, based on the shared economy model. "Blockchain is a route towards greater efficiency" added Olivier Portenseigne. To sum up, it provides an alternative model, increases efficiency and makes funds more accessible to all types of investors.

 

Can data come to the rescue?

Daniel Drummer, Vice President, Fintech Strategy & Partnerships, J.P. Morgan, then shared his personal opinion on the role of Artificial Intelligence in capital markets. "AI is en vogue atthe moment, and is everywhere in the news and discussion: it is now able to win games of Go and can play Super Mario without supervision" started the FinTech specialist who thinks that AI will disrupt Investment Management just like Uber changed mobility. He then shared three hypotheses with the audience. "First of all, AI is becoming a commodity and thanks to the likes of Google and Amazon and their open-source tools, everyone has access to data and information. Social media also influences investment decisions" added Daniel Drummer. He also reassured the participants: "Machines won't take over and Humans will still be needed to control and supervise".

 

His speech was followed by a round table entitled "How to face major macroeconomic challenges?" moderated by Sasho Bogoevski, Managing Director – Multi Asset Solutions, AB, who brought together Laurent Gorgemans (First Vice-President, Edmond de Rothschild Asset Management), Jean-Pierre Gomez (Head of Regulatory & Public Affairs, Société Générale Securities Services) and Kristel Cools (Group Head of Asset Management, KBL European Private Bankers). According to Laurent Gorgemans, many political and economic challenges are ahead of us: "The Trump administration will add more barriers and taxes for imported good on the one hand, and inflation is expected to go up in Europe". Kristel Cools also thinks that the risks are mostly political: "investors do not like this period of unpredictability. What's in store for defensive investors? Where will the sweet spots be?" The key is agility and flexibility. Jean-Pierre Gomez focused on the regulatory side, and underlined that for 40% of asset managers, the main challenge is adaptation to new regulations. "Why so many regulations? Simply because the regulators want to better protect the investors. How to do it efficiently is another challenge". Mrs Cools also added that asset managers now need to be flexible, move quickly and protect what they think is necessary.

 

Jon Jonsson, Senior Portfolio Manager, Global Fixed Income Strategies, Neuberger Berman, then took the stage with a presentation entitled "Flexibility is Key- Managing Risk and Opportunity in Today’s Fixed Income Markets". In his speech, he went through 6 investment themes: Avoiding unattractive & asymmetric risk (short duration bias), low global inflation expectation (long inflation linked bonds), relative value opportunities (long US vs. German government in 30y), long non-agency RMBS (comfort with underlying fundamentals), active currency management (significant dislocations) and corporate credit risk which is no longer cheap.

 

"The trend was your friend, but what for 2017? How did politics and populism disrupt the journey of globalization and deflation? What are the key investment themes for 2017 and how to manage risk?" was the name of Sasho Bogoevski's presentation. "Investing is all about time horizon" started Sasho who then presented key investment themes for the short term (up to one year) medium term (from 1 to 3 years) and then long term (3 years and more). One can notably expect stronger economic growth and inflation, with capital spending picking-up during 2H17, but also wage pressures increasing in the US, Japan and Germany. "US 10yr rates stay below 3% on the back of global demand for income; US fixed income outperforms Europe/Japan" he added.

 

Yoram Lustig, Head of Investments Team, Multi Asset Client Solutions, AXA IM, focused on innovation and experience to generate a regular income. The solution is based on an unconstrained global multi-asset approach, allowing to take advantage of multiple yield opportunities, and has a current target income of 5%. "It is also built to seek quality income opportunities around the world and across asset classes. A diversified mix of high yielding and long-term growth assets" added Yoram Lustig. He then shared his team's philosophy: active investment decisions are key to benefit from market inefficiencies and to manage the underlying security selection. On risks, he added: "market risks are by nature unstable. Understanding the structure of multi-asset portfolios in terms of risk structure is key".

 

Economic outlook and beyond: the best is to come!

The final speaker of the day, Philippe Ledent (Senior Economist, ING Belgium & Luxembourg) stated: "Currently, the economy is doing quite well. It is recovering and we are seeing improvements of all indicators. Trump is actually entering in a US economy that is doing well". The question of protectionism remains undecided, yet, consumers and firms are confident, and some measures might have a positive impact on the US economy. "In Europe, there are several risks linked to politics with elections in the Netherlands, France, Italy, Germany, etc, with the risk of a populist vote. Therefore, the recovery continues but the economy is not booming due to these political risks" highlighted Philippe Ledent. The Senior Economist also tackled the issue of the aging population which is actually transforming our economy and has an impact on potential growth. "But opportunities emerge with an aging population that has different needs, and innovation is therefore key. We live in an interesting period as a startup can for instance change the entire model of a sector. Compensation for the impact if the aging population will not come from the population itself, but rather from innovation" concluded Philippe Ledent.

 

 

© Farvest Group

 

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